What Is Basic

Any single property with more than one residential unit is essentially a multifamily residence. One of the units in a multifamily building may be occupied by the owner, who may rent the other units to tenants. As an alternative, they may rent out every unit while living somewhere else.

A multifamily residence often has up to four separate units. Any structure with five or more units is regarded as a commercial property in both the United States and Canada, and special guidelines and procedures for purchasing them apply.

Multifamily Housing Types

There are many different sizes and shapes of multifamily dwellings. The most typical ones you'll discover on the market are listed below:

• Duplex: A duplex refers to a home divided into two units by a common wall or ceiling. It’s essentially a semi-detached house in which a single owner owns both units. Each unit has a private entrance and outdoor space, and there aren’t usually any communal areas.

• Triplex: A triplex is similar to a duplex but has three residential units rather than two.

• Quadrex: Finally, a quadrex, sometimes called a fourplex, is more or less the same and has four residential units.

These multifamily dwellings will all have a common base and roof, but each unit is independent and has its own kitchen, bathroom, and other living spaces. They occasionally have a yard as well.

Each type's units can be piled on top of one another or arranged in a row. There may be a combination of units in some instances, both stacked one on top of the other and stacked side by side.

The Benefits and Drawbacks of Purchasing a Multifamily Property

There are many advantages to purchasing a multifamily property, but it's important to realize that it's not always easy sailing.

Pros

Here are some of the advantages of owning a multifamily home:

• Ability to live in one of the units: By living in one unit and renting out the other(s), you’ll have more control over repairs, a closer relationship with your tenants and better cash flow. The rent you get from your tenants will help cover not only your mortgage but also your housing costs.

• Tax benefits: As a property investor, you can include home repairs and interest payments from your mortgage as business expenses.

• Wider pool of tenants: The more units you have to work with, the quicker you can earn back your investment.

Cons

But while there are several benefits, there are some potential disadvantages to consider:

• Landlord commitments: Being a landlord can take a chunk of your time, and you bear many responsibilities. Tenants may be knocking on your door with issues at all hours, so don’t take it lightly. You’ll also be responsible for all repairs and maintenance.

• More expensive: Compared to a single-family home, you can expect to pay much more for a multi-unit property. Some lenders may also require a larger down payment.

• Financial risk: There may be times when you don’t have tenants or they’re late with payments. You’ll still need to keep up with your mortgage payments, which can cause financial strain. It’s essential to have a substantial emergency fund.